Is the Property Ladder Still A Reality?

2018-04-02


We have all heard the phrases: "the perfect family home", "suitable for downsizing", "a great starter apartment", whether it is in person or through the media. The question now becomes: is this concept of the property ladder, jumping from location to location, flat to house, owning more than one within a lifetime, still a viable concept? 86% of renters cannot afford to buy one home[1], let alone multiple. We may need to come to terms with the possibility that the property ladder is a perpetuation of a past society that is no longer affordable, or more exclusive to the elite.


Household income is falling at the fastest rate in over 40 years[2], wages are stagnating, and the cost of living is being squeezed, meaning the option of moving around is very limited to the more affluent. If a couple already owned their first home and wanted to upsize to a larger and more expensive property, to accommodate a family, salary increases through career progression could enable them to do so. Another possibility is re-mortgaging to bring monthly repayments down for a more expensive property. However, with the average age of UK first time buyers increasing from 30 to 32[3], this would mean repaying up to and including your retirement. Nearly 40% of people wanting to retire in 2016 still owed money on property[4]. Many will be using their pension pay-outs to pay back the debt, but now nearly half of millennials have no pension, so it seems unlikely that it will continue past this generation.


Even downsizing is an issue for some, especially pensioners moving down the ladder. To be precise, 5.7 million older people, 11 million in two decades, are looking to move. 48% of over 65s want to downsize but cannot[5] due to limited choice when it comes to housing. It may be the reason for so many people renovating and improving instead of moving[6].


There are other ways of getting involved with property. Prefabricated houses may be the way of the future, receiving huge amounts of interest from developers and councils. A detached prefabricated house costs £75,000-100,000[7]. They are modular, meaning they are built to expand, but lack of land to build on is the most pertinent problem. Many younger buyers are relying on the bank of Mum and Dad, with parents lending more than £6.5 billion to their children buying a home in 2017, a 30% increase on the previous year[8]. Some have split a mortgage payment among friends who cannot individually afford a house.


Homegrown allows property investment on a smaller scale. Instead of investing £272,000 into a house, which will be the average price of an English home in three years[9], you could instead invest a smaller amount across several different projects released throughout the year, diversifying your property portfolio and therefore mitigating the risk. Our mission is to give investors access to pre-vetted development projects through an independent, FCA authorised online platform; whilst providing established developers and housebuilders with access to funding that will enable them to build more homes.


If you would like to stay up to date on all investment opportunities, sign up and you will receive a free info pack. Homegrown is an online crowdfunding platform that connects experienced small to medium sized developers with financing from everyday investors, allowing you to diversify your portfolio beyond buy-to-let and into the world of alternative finance and crowdfunding. Find out more information by signing up or simply email one of our team members at info@homegrown.co.uk.


Sources:

  1. Clark / 86% of renters can’t afford to buy a home: Here’s how you can prepare
  2. The Guardian / Household income falling at fastest rate since 1976 as UK savings rates crash
  3. MailOnline / Who can get on the property ladder today? Official figures reveal it's likely to be a thirtysomething couple with a £50,000 deposit
  4. The Guardian / One in four UK retirees burdened by unpaid mortgage or other debts
  5. McCarthy & Stone / Downsizing exodus: 5.7 million older people eye a move now, rising to 11 million in under twenty years
  6. Evening Standard / Londoners pay to improve homes rather than move
  7. The Guardian / Build it, split it, blag it: alternative ways to get on the property ladder
  8. Legal and General
  9. This Is Money / UK House Prices Expected To Rise

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